Cryptocurrency News Round-Up: Bitcoin 'Flash Crash' and Chinese Mines

A "flash crash" saw bitcoin prices plummet yesterday, however most markets are beginning to show signs of recovery.

Most major cryptocurrencies have seen their prices begin to recover somewhat, following several days of market turmoil.

Despite seeing its price drop to as low as $309 (£185) on one exchange yesterday, bitcoin has since recovered to around $470.

Litecoin, peercoin, dogecoin and namecoin saw their values rise by between 4% and 9% since yesterday, while darkcoin saw an increase of more than 30%.

The anonymity-focused altcoin has been one of the hardest hit since prices began to slide last week and still has a market capitalisation below $10m - less than half of what it was one week ago.

Bitcoin 'flash crash'

The price of one bitcoin fell by around $150 in a matter of minutes on the Bulgaria-based exchange BTC-e yesterday in what analysts are calling a "flash crash".

The sudden drop in price has been blamed on a cascading effect brought about by margin trading - the practice of trading on credit.

Bitcoin saw its price briefly plunge to a low of $309 on the BTC-e exchange yesterday.BTC-e

"The shape and especially timing of the crash points towards margin traders being liquidated (or stop orders being executed)," Raffael Danielli, a margin trading critic, wrote in a blogpost following the crash.

"The fall below $400 was mainly due to a lack of bids in the order book, and not because the market believed that the true value was below $400."

Inside a Chinese mining operation

A recent trip by bitcoin advocate Jacob Bitsmith has given a rare glimpse inside a large-scale Chinese bitcoin mining operation.

Documented on his bitcoin news site The Coinsman, Bitsmith describes how 2,500 machines hashing at 230 Gh/s eat up in excess of ¥400,000 (£40,000) of electricity per month.

"Walking around the warehouse floor I was struck with a feeling of awe".Jacob Bitsmith

Using some rudimentary back-of-a-cigarette-pack calculations, IBTimes UK estimates that the operation makes around £1.1m per year, without taking into account the cost of the mining machines.

"Walking around the warehouse floor, I was struck with a feeling of awe that this is what keeps bitcoin alive," Bitsmith writes. "That even if someone wanted to bring down bitcoin, they'd have to outdo these guys and the dozens of other operations like this around the world.

"The other feeling I got while there is that this is kind of a libertarian fantasy for many. These guys are performing a valuable service and getting paid well for it."